Yuan slightly eases as corporate dollar demand offsets central bank’s stronger fix

China’s yuan eased slightly against the US dollar on Wednesday, as corporate demand for the greenback outweighed a much stronger official fix.

Stability in the foreign exchange market is expected to be a top priority ahead of and during a key meeting starting on October 18.

Prior to market opening on Wednesday, the People’s Bank of China, the country’s central bank, lifted its official yuan midpoint to 6.5841 per dollar, its highest level in three weeks.

The move in the official guidance rate was the biggest one-day strengthening in percentage terms since June 1.

Wednesday’s official midpoint was 432 pips or 0.66 percent firmer than the previous fix of 6.6273 per dollar on Tuesday.

In the spot market, the onshore spot yuan opened at 6.5717 per dollar and was changing hands at 6.5788 during afternoon trading, 0.11 percent weaker than the previous late session close. The offshore yuan was trading around 6.5713.

Traders said bank clients were taking advantage of cheaper dollars, and that dragged the yuan lower on Wednesday.

A possible widening of the yuan’s trading band after the key meeting has been widely discussed in the market this week.

“Although the current trading band is not much of a binding constraint on the yuan, it does indicate policy confidence in the currency and the success of the recent strategy to reduce currency outflows,” Rob Carnell, head of Asia-Pacific research at ING, said on Wednesday.